Moody's rates Far East Telecom Ba3

Moody's Investors Service said it assigned a Ba3 corporate family rating to OAO Far East Telecom, and Moody's Interfax Rating Agency assigned an Aa3.ru national scale rating to the company.

The outlook is stable.

The agency said the ratings reflect the company's position as an incumbent fixed-line operator in the Far East Federal District of Russia and the Republic of Yakutia, its dominant position in its key traditional voice telephony market in the region, the relatively benign legislative environment and the absence of any immediate threat of local loop unbundling, the company's strong positions in the developing broadband market, its robust financial performance, relatively low leverage, strong management team and conservative approach to financial policies.

However, Moody's said the ratings are constrained by the company's relatively modest revenue base, the growing competition from altnets and mobile operators, the risk of fixed-to-mobile substitution, the potential pressure on the traditional fixed-line segment should future state-approved tariff increases lag behind inflation, the company's concentration on the residential market with a low presence in the more lucrative corporate segment, limited growth potential due to the regional specifics and significant geographical dispersion of urban agglomerations.

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